George Osborne is preparing to end a six-month search for the new head of the City watchdog this week after ruling out one of the leading contenders for the job.

Sky News has learnt that Greg Medcraft, the head of the Australian securities regulator and widely tipped as a leading candidate to run the Financial Conduct Authority (FCA), will not be named as the successor to Martin Wheatley.

Mr Medcraft, whose term at the Australian Securities & Investments Commission is due to expire in May, is expected to be nominated for a second term in the post.

The Chancellor's choice of a new FCA chief is a crucial one as the regulator seeks to overcome a torrid few months in which it has been accused of going soft on the City.

It emerged last month that the FCA had decided to abandon a review of culture in the banking sector,

Among the other names mentioned in connection with the top executive post at the FCA are Xavier Rolet, boss of the London Stock Exchange Group; Mark Branson, chief executive of Switzerland's Financial Market Supervisory Authority (Finma); and Charles Roxburgh, a senior Treasury official.

Tracey McDermott, the acting FCA chief executive and a long-standing UK regulator, withdrew her application for the job in December, a move subsequently disclosed by Mr Osborne during a media interview.

Mr Wheatley' was ousted by the Chancellor last July as he indicated that he wanted to broker a "new settlement" between the financial services industry and its regulator.

The identity of his replacement has become a central preoccupation for the City as its biggest firms seek clues about the future tone of regulation from the main conduct watchdog.

Mr Wheatley had infamously suggested that his approach would be to "shoot first and ask questions later".

The continuing volume of misconduct penalties being announced by regulators has, however, prompted criticism that the Chancellor risks sending too lenient a message to the City.

Among the new chief executive's most important tasks is likely to be to oversee the implementation of a deadline for claims for payment protection insurance mis-selling - in financial terms, the biggest scandal in British banking history.

The FCA and Treasury declined to comment, while ASICS could not be reached for comment.